REAL ESTATE REGULATORY &

DEVELOPMENT ACT, 2016

[RERA]

Presented By:-

CA. Sourabh Ajmera and CA. Omprakash Ajmera

(The authors are members of the ICAI. They can be
reached at info@ajmeraandajmera.co.in)
 Real Estate Act
Financial Discipline

Acountability
Transperancy

Compliance
Customer
Centricity
Improve the perception of the sector among various stakeholders

Uniform regulatory environment

Projects which do not have
COMMERCIAL and Land under development
COMPLITION CERTIFICATE
RESIDENTIAL projects including MORE THAN 500 SQ MTS /
before commencement of
PLOTTED DEVELOPMENT NO. of UNITS exceeds 8
ACT

RENOVATION or REPAIR or REDEVELOPMENT projects not involving Marketing, Advertising,

Selling & New Allotment NEED NOT BE REGISTERERD
 Fiscal discipline will play a critical role in project development and requires utmost
importance

What it entails

70% of the Withdrawals

funds collected Withdrawals to In proportion to be
from allottees cover to the % certified by
Financial Discipline

needs to be construction completion Engineer, Promoter to

parked in the and land cost method Artichect , compensate
project account and CA buyer for
incorrect
statement
with full
rerun of
Provision for Projects Provision for Interest on property
RERA to freeze Account to be stronger delay will be cost with
project bank Audited / FY . financial same for interest
account upon Copy to be penalties for customer
non- submitted to RERA non- and
compliance RERA compliance promoter
 Structured communication is required to furnish all project related information to the customers

What it entails
Quarterly
Consent from Consent of updating
No false RERA
affected 2/3rd
Number, type statements or website
allottees for allottees for
& carpet area commitments with details
any major any other
of apartments in
Transparency

addition or addition or such as

advertisement unsold
alteration alteration
inventory &
pending
approvals

Consent of
Informing No Launch or 2/3rd
No arbitrary
Project allottees for advertisement allottees
cancellation of
complition any minor before for
units by
time frame addition or registration transferring
promoter
alteration with RERA majority
rights to 3rd
party
A PMO would be required to track and monitor developments as per defined project plans

What it entails

Offence by an
Every office of the officer committed
Accountability

Quarterly update company , who as with the consent

of project in charge or or connivance of
progress along responsible will any director ,
with pending be liable for the manager ,
approvals on conduct of the secretary or other
RERA website company and officer of the
deemed guilty company , will
also be guilty
 Registration of all projects & brokers/agents and a strong dispute management will be
required to ensure compliance

What it entails

Authenticated Dispute resolution Mandatory

copy of all Registrations of registration of new
within 6 months
approvals, brokers/agents and existing
at RERA and FERA
commencement with RERA projects with RERA
appellate before launch
certificate, rebalance
Accountability

sanctioned plan, Separate

layout plan of Timely updating registration of
Developers to
development of RERA website different phases
share details of
work, proposed of a single
projects launched
facilities, projects
in last 5 years
proforma Maximum 1 year
with status and
allotment letter, extension in case Construction
reason for delay
agreement for of delay due to no and land title
with RERA
sale & conveyance fault of developer insurance
deed to be given
when applying for Annual audit of Conveyance deed
project Project
projects account for common area
registration with completion time
by a CA in favor of RWA period
RERA
 Benefits of RERA

Industry Developer Buyer

Significant buyers
Governance and protection
Transparency Quality products and
Common and best timely delivery
Project efficiency and practices
robust project delivery Balanced agreements
Increase efficiency and treatment
Standardization and
quality Consolidation of Transparency - Sale
sector based on carpet area
Enhance confidence of
investor Corporate branding Affordability will
become distant
Attract higher Higher investment
investments and PE Delayed launches and
funding Increase in thereby lesser projects
organization funding
Regulated Safety of money and
environment transparency on
utilization
 Possible impact on sector
Initially, a lot of work is to be done to get the existing and new
projects registered. Details such as status of each project executed in
Initial Backlog last 5 years, promoter details, detailed execution plans etc. needs to be
prepared.

Increased Project Registrations with RERA and insurance cost for construction and land
Cost title.

Land and approval costs to be meted out of internal accruals as pre

Tight Liquidity launch concept may end . It may lead to a shift in equity financing from
debt financing prevailing currently

The cost of capital may go up as developers may now have to fund the
Rise in Cost of land the approval cost through equity. With frequent delay in obtaining
Capital approvals, debt funding may not be an ideal route for prominence

With entry in the sector made difficult, the sector may witness
consolidation. Strong financial and execution capability is required to
Consolidation
launch a project. The development model/agreement may gain
prominence

Increase in The project launch time may increase since a lot of time will involve in
Project Launch finalizing finer details before launching a project. Details such as
Time complete drawings, utilities layout, etc. Needs to be finalized before
project starts.
Who is a promoter ?
Definition primarily covers owners of the project
Developers and his assignee
Development authority or other public body ;
State level Co-operative Housing Finance Society and a Primary Co-operative Housing
Society;
Power of attorney holder for land; and any other person who constructs any building or
apartment for sale to the general public

Open issues International reference

Implication on joint development, Only master developer and sub-
development agreement ? developers under him are covered.
Is it applicable to services and Developer means a person engaged in
marketing arrangements ? real estate development and the sale of
Is independent contractor a promoter ? properties to third parties.
Is society covered under re-
development arrangements ?
Whether slum development for local
authorities in return for TDR covered ?
Registration of a Real Estate project
Must for projects inviting sales before completion
Minimum threshold for projects registration defined; Can be tightened by states
Existing projects, awaiting completion certificate, covered
Phase wise registration allowed
Registration for a certain time period as stipulated by developer with maximum 1 year
extension
No marketing or sales without registration.

Open issues International reference

Meaning of project Single building/plot
or cluster of buildings?
Ability to change the project where
municipal approval has been granted
Implications on township and large
format projects
Built-to-lease model/ long term base?
Mandatory registration for all
developers and their projects
Provision to de-register project as well
No sale of under-construction units
before registration
Must to have all approvals in place
before registration
Project account
Safeguarding consumer interest
Of the total collections, only 30% can be withdrawn without any restriction
Rest of the amount (70%) can be withdrawn in stages in proportion to the percentage
completion of the project (construction cost plus land cost)
Withdrawals to be certified by CA, Engineer and Architect; Audit report by a practicing CA
to be submitted to RERA annually.

Open issues International reference

Impact on existing/ new joint
development arrangements?
Separate account for each project?
Amount realized for the project covers
government charges and taxes?
How to compute %completion?
Accounting principle/ Physical progress
Withdrawals for refunds, penalties, SD?
Mandatory to open an escrow account
with an escrow agent - individual customer
accounts to be maintained
All receipts, including loans, have to be
deposited in this account
Withdrawal only for payment to
contractors Post completion of project,
amount can be withdrawn, leaving aside
5%, which can be withdrawn after 1 year.
Additions and Alterations in a project
Changes in Design, Structure

Minor change-authorized by architect/engineer and inform allottees

Major changes - Approval of all allottees of that unit/ building affected by the change
Other changes- approval of 2/3rd allottees A person holding multiple units (in his name
or family's) will be counted as a single allottees

Open issues International reference

Implications on the project planning and A project may be cancelled by authority

design processes if there is significant changes in project
What to do in situation if FSUFAR plans
increases after project launched?
How will modifications necessitated due
to changes in local building bye. Laws (such
as fire, MoEF etc.)
Advertisements
Significant implication for untenable promises
No advertising and marketing before registration
Any advertisement published by a developer must mention the website address of
RERA, where all details about the project have been entered including the registration
number.
Any loss to the allottee due to incorrect, false statement include in advertisement must
be compensated by the promoter.
Further, a buyer may withdraw his entire investment along with interest if a buyer is
affected by any incorrect, false statement in the advertisement.

Open issues International reference

Is builder liable for unfair trade practices No advertisement or marketing before
of an agent / unregistered agent and vice- authorization by RERA
versa? Regulation of advertisement norms
Is marketing or publicity, not inviting Monitoring of real estate advertisement
sales, allowed? - hoardings etc? by RERA
Conflicting/ contradicting advertisements
in different media Change in circumstances
beyond control
Approvals by RERA
Carpet area disclosure
Sale on carpet area

Net usable floor area of an apartment

Excludes the area covered by the external walls, areas under service shafts, exclusive
balcony, verandah or open terrace area
Includes area covered by the internal walls

Open issues International reference

Sale of balconies, verandah or terrace? The registration with the authority is on

What would happen if the final size of flat
increases or decreases?
Closed balconies on payment of
municipal fees?
Net Area basis (which is essentially the
carpet area)
The agreement may be done on Gross
Area (which is super area)
In case of more than 5% decrease in the
net area, developer has to refund pro-
rated amount to property buyer
In case of increase in net area, property
buyer does not have to pay anything to the
developer.
Redressal Mechanism
Sub-motto Call for details/ Promoter
information as
Investigation maybe required, call Or
Any aggrieved 1 2 for Attendance, etc Allottee
person can file and give
PER opportunity for Or
complaint hearing
Authority RE agent
/AO
3 Issue order*

5 Issue order*
RERA Appellate
tribunal**

4 Agreed person can file an approval within

60 days of receipt of order

6 File a appeal before the High Court against the order of RERA High Court
Appellate Tribunal within 80 days of receipt of order

*For payment of compensation/ penalty basis complaint received or suo-moto investigation

**Promoter aggrieved by the order of the Authority or of AO, the appeal before RERA Tribunal can be heard only alter deposit of unrest
30% of penalty or such higher % as may be determined or payment of interest and compensation to the Allottee, or both
Other provisions (1 of 2)

Structural defects

Any structural defect or any other defect in workmanship, quality or provision of services
or any other obligations of the promoter as per the agreement for sale, brought to notice
of promoter within 5 years from possession, has to be rectified within 30 days free of
charge by the promoter.

Transfer and assignment

Promoter shall not transfer or assign his majority tights and liabilities in respect of a
project to a third party without obtaining prior written consent from 2/3 allottees and
RERA
The allottee, irrespective of
Number of apartments or plots booked by him or booked in the name of his family
In the case of other persons such as companies/firms/any association of individuals, by
whatever name called, booked in its name or booked in the name of its associated
entities/related enterprises, shall be considered as one allottee only.
Other provisions (2 of 2)

Refund with interest

Failure of promoter to give possession in accordance with the terms agreed or due to
revocation of registration- liability to return the amount received with prescribed interest
(under Rules).

Association of allottees/ Conveyance

To be formed within specified time period under the local laws or 3 months after
majority of units have been sold
Execution of a registered conveyance deed in respect of the undivided proportionate
title to the common area in favour of RWA.
Real estate agent

Facilitate transaction of properties in projects which are

registered with RERA

Facilitate possession of all Maintain and preserve

the information and books of accounts,
documents to the allottee Functions of
records and documents
at the time of booking an agent as prescribed
Unfair trade practices

Not indulge in unfair trade practices

False or misleading
Falsely represent Falsely represent Permitting
Unfair trade statement,
that services are of affiliation with a publication of false
practices whether written or
particular grade developer advertisement
orally
Offences and Penalty
Provision Promoter Agent Allottee
Non-registration of Up to 10% of project Penalty of INR10,000
project/agent with cost and per day during
RERA and continue to imprisonment of 3 default tenure up to
do so years for continuous 5% of property cost
default
False information Up to 5% of the
while making an estimated project
application to REM cost
Non-compliance with Up to 5% of the Up to 5% of the
any provision of the estimated project property cost
Act cost
Non-compliance with Up to 5% of the Up to 5% of cost Up to 5% of cost
the aforesaid order estimated project property cost property cost
of REM cost
Non-compliance with Up to 10% of cost Up to 10% of cost Up to 10% of cost
the aforesaid order and imprisonment of and imprisonment of and imprisonment of
of the Appellate up of up to 3 years or up of up to 1 years or up of up to 3 years or
Tribunal both both both
Revisit business and operational model - Developer
Land due diligence
Prioritizing approvals Review employment contract
Phase-wise approval Organization structure
Dealing with RERA Requisition approval process
Company profile for application purpose

Cash-flow management
Detailed project and Sourcing equity partners
construction plan BD HR Monitor cost and
Managing modifications schedule overruns
BD Design Finance Auditing of project
Design FINANCE accounts
AREAS
Developing agreements Legal IT
and contracts for sales,
Manage RERA website
contractors, vendors,
Cyber security
agents etc. Areas Legal IT
project Sales/ Deliver CRM

Capability to design, budget, execution, Advertisements

monitoring and handover
Email and communication exchange with
Identification and finalization of contractors
customers
Defect liability
Empanelment of channel partners
Managing alterations and additions
Prioritize existing and planned Projects
Final stage < 1

Prioritize completion Prioritize completion

year
Project Status

Mid-way

Build RERA Prioritize completion

competency

Build RERA
launch/Planned

Consider competency or Build RERA

New

revising/shifting phasing out the competency

project

< 10% 10-50% > 50%

% sold out
Priority status
Medium Low Top
Next steps

Developer Investor

RERA readiness assessment

RERA readiness assessment
Review and revisit existing
commercial arrangements - Escrow/
Institutionalize periodic RERA,
Waterfalls/ Structured deals etc
project, process compliance audits
Ring fence senior management -
Explore mature design
promoter obligations liabilities
development and project execution
and monitoring concepts
Reinvent future commercial
arrangements
Institutionalize periodic RERA,
project, process compliance audits
Institutionalize periodic RERA,
project, process compliance audits
 Thanks
AJMERA & AJMERA
CHARTERED ACCOUNTANTS

Head Office : Borivali(West),Mumbai

Branches:
Andheri(West),Mumbai Delhi(NCR)
Bhandup (Thane) Bhilwara,Rajasthan
Gulabpura,Rajasthan